Is it better to invest in state or out of state?

Question

Hi everyone,

I hope you all are having a great day! I wanted to ask for your input. Just like a lot of others on here, I’m new to the real estate world and I’m looking to buy some property. I currently live near Orange County, CA, and am looking to buy a 2B/2B condo for around $450k. I have a little less than 10% for a down payment so I would have to do a PMI. Lately, I’ve been discouraged to continue looking because properties around this area are ridiculously expensive and the HOA’s are around $250 monthly. So I feel my mortgage payment in total would be pretty high. I was planning on renting out the 2ndroom so that would help with the payments.

I also have plans to move to Portland, OR, within the next 3 years and plan to live out there for about a year or two. The market is a lot more affordable and I can buy a home now with no HOA. So my question is, would you think it’s better to consider buying now in CA or invest out of state? Essentially, I am looking for a property I can eventually rent out. Any input would greatly help.

Thank you very much,

Ian

Drew Sygit · Answer

You might want to check out Portland's landlord-tenant laws, which seem to be VERY tenant friendly.

AJ Shepard · Answer

If you're planning the move to Portland anyway might as well invest in property that has great potential for appreciation and cash flow. You just need to find the best property management company to do the work for you. If you prefer to invest passively out-of-state, I suggest going for the syndication route as LP. Best of luck on your RE journey!

Jon Schwartz · Answer

Ian,

Three years is a pretty short timeframe to bank on appreciation or market rents catching up to the mortgage on a Socal property. What's your rent payment now? If you're in a comfortable situation with a low rental rate, I'd hold tight and save your money for Portland.

Are you handy? If you can find a slightly distressed condo to buy at a discount and improve, I think you'll be fine on a three-year timeframe. You can sell the condo on your way to Portland or probably rent it at a profit.

Renting out the second bedroom (ie, house hacking) will definitely help the numbers! Factor in principal paydown. If you buy and rent out a bedroom, how much out-of-pocket will you be each month? How much principal will you pay down? If you sell in three years with no appreication, how much equity in principal paydown will you recoup?

To put it another way, owning with a roommate might cost more per month now, but when you sell in three years, you might gain back more than you put it -- even without any appreciation gains.

Best,

Jon

Account Closed · Answer

In state. Always! No other way! Especially, since your asking that questions shows your lack of real estate investing experience. Don't even think about it. When you invest out-of-state there are 'too many hands in the soup'. You will lose a high percent of your potential profits, if you can make any profit, at all, due to management costs and inefficiencies.

Brad Hammond · Answer

Hey @Ian Rivera, that's a tough question. I would do some research and see which markets are going to have better appreciation over the next 5 years. If you invest in Portland, you will obviously need to cash flow from day one. That is possible in your price range but it might be further out than you want. I always like to invest locally but everyone is different. Let me know if you want to chat about the local market.

Is it better to invest in state or out of state?

Is it better to invest in state or out of state?

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